As Summer approaches, encouragingly, whilst the geopolitical risks remain substantial, markets have started to move upwards across the world.
Up until now the super seven tech stocks in the USA have been responsible for a large element of the increasing share valuation, in particular, of growth portfolios in recent years. A more evening out of performance across the board is thus welcome, particularly for globally diverse portfolios, such as yours.
Across the world, the trajectory of Economic Growth has been variable, so far this year with the US, Japan and China performing strongly, whilst the UK and Europe moving ahead more slowly.
Inflation, likewise, has diverged, which is likely to result in variations in the timing of any possible reductions in interest rates. Higher inflation has historically been associated with more short-term market volatility, which is something we will have to continue to accept.
History tells us the timing of rate rises and cuts is often wrong. This year, the many Elections (the need to create a feel-good factor) which are fast approaching in the US, here in the UK, and in many other parts of the world are likely to be significant.
In the meantime, the higher interest rate environment (more normal) enables us to invest for a better income, at lower risk, for funds we manage with an income objective. It has also created the opportunity in higher-risk portfolios to invest in some quality assets at very attractive prices, which have fallen out of fashion/favour over the last two years, by going against the herd, and taking a longer-term view.
Debt levels across the Economy, Government, Corporate and Individual remain at very high levels, with higher interest rates and some restraints on the availability of credit. Taking debt into account when drawing up portfolios in our view remains very important.
Geopolitical risk, meanwhile, remains a serious and rising concern from an Economic perspective, whilst not taking lightly the humanitarian one.
The final conclusion we come to will really be no surprise to those of you who know us well, is that whichever direction the world moves in, the key to protecting and hopefully growing your wealth is to take a longer-term view, which has always held true, by owning the highest quality assets we can for you, whether it is in Government debt or Equities, and be prepared to change strategy as markets indicate.